The demonetisation of two high-value banknotes has hit villages in the state more severely than urban areas due to two factors -- poor internet penetration and fewer bank branches in rural areas.

The demonetisation of two high-value banknotes has hit villages in the state more severely than urban areas due to two factors -- poor internet penetration and fewer bank branches in rural areas.

Unlike urban areas in the state, where people are also opting for net banking apart from withdrawing cash from ATMs, in state’s rural areas, the problems arising out of demonetisation have aggravated due to these two factors. Nearly 62 % bank branches in the state are located in urban and semi urban areas.

To strengthen net connectivity in rural areas to encourage online banking transactions, state’s minister for science and technology Umashankar Gupta on Tuesday asked MP state electronics development corporation to take necessary steps to provide net connectivity up to the gram panchayat level. But there is a long way to go.

Number of bank branches in state has decreased

Also, compared to last year, the number of bank branches in state has decreased. According to the State Level Bankers Committee (SLBC), there were 7,299 bank branches in the state in March this year, but with the closure of MP State Agriculture Rural Development Bank which had 268 branches, the number now has come down to 7031.

Out of those 7,031 branches, 2651 (38%) are in rural, 2263 (32%) in semi urban and 2117 (30%) in urban areas. Also, according to SLBC, there are 9,266 ATMs installed in the state. As per the RBI data, MP has 127 ATMs per million people compared to nation’s 171.

The state’s lagging behind in terms of banking penetration has further added woes to rural people after the demonetization started. With people thronging the available branches and ATMs in rural areas, there is a large section of people who are either returning empty-handed or having a tough time in getting cash. It has severely hit traders and shopkeepers whose business has been affected by 30 to 40 %, according to some rough estimates.

As per the report of the Committee on Medium-term Path on Financial Inclusion (CMPFI) 2015 on RBI website, while the demographic penetration (average distance of a potential customer from the nearest physical bank outlet) has increased one-and-a-half times during 2006-15, the north-eastern states and states like Madhya Pradesh are less penetrated in terms of the number of branches in comparison with their populations.

Only 8 out of 100 people have access to internet in rural areas

So the committee has recommended installing of more ATMs in rural and semi-urban centres to create more touch points for customers, adding the financial inclusion fund may be utilised to encourage rural ATM penetration.

According to a Telecom Regulatory Authority of India report released in August this year, only 8 out of 100 people have access to internet in rural areas against 49 in urban areas. Overall, only 19 out of every 100 people have access to the internet penetration in the state.

‘Problem has aggravated as people were hoarding cash’

SLBC convenor Ajay Vyas said that the problem has aggravated as people were hoarding cash and rushing to banks and ATMs to get cash, which is not coming back into circulation that much. He said due to this many ATMs and banks are running out of cash soon.

“The situation would be better once ATMs start dispensing new Rs 2000 and Rs 500 banknotes. Till now 38 ATMs have been calibrated and rest of 9,000 will also be recalibrated. We are first focusing on areas where the cash demand is very high,” said Vyas.